Event risk out of Brazil and the US will likely be driving USD/BRL’s price movement tomorrow. Forecasts for year-on-year industrial production in Brazil stand at -1.5 percent with estimates for US durable goods at -0.40 percent. The largest economy in South America has been struggling to boost economic growth as fears of a global slowdown gain traction and begins to sour risk appetite, weighing on emerging market currencies.

In the US, data has been underperforming relative to economists’ expectations according to the Citi Economic Surprise Index. The longest-ever recorded US government shutdown trimmed GDP growth, and increased economic friction from the US-China trade war sent sparks flying and made bulls blink. The uncertainty between Beijing and Washington – compounded by risk emanating out of Europe – may continue to impact the US economy.

Another major contributing factor that will continue to influence the Real’s price movement is the Brazilian government’s effort to push through a major pension reform bill. Over the course of a decade, the proposal is anticipated to save over 1 trillion Reais and could help alleviate Brazil’s severe 41.13 billion fiscal deficit. Expectations that the bill will pass has boosted the Ibovespa equity index and made investors bullish on the Real.

Looking ahead, the pair will be watching the upcoming retail sales data on March 14 and closely monitoring developments related to the structural reform. The lower house of Congress is expected to vote on it by the end of May. After that, it will have to survive the Senate. Trade war-related news and concerns over slower growth my trim any prospective gains the Real gleans from positive pension-reform developments if demand for haven assets becomes the financial preference for investors.

FX TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter